529 Plans as Gifts
Giving or contributing to the gift of education for a loved one, if you are so inclined, is an impactful and rewarding way to exercise the act of giving. One way to do this is through a 529 Education Savings Plan. While 529 Education Savings Plans were
originally designed to facilitate saving for higher education (college) expenses, the Tax Cuts and Jobs Acts (TCJA), signed into law in December of 2017, further expanded the use of 529 Plans to allow K-12 expenses to be included under the definition
of “qualified education expenses.”
There are several tax-related advantages that go along with this unique “Gift of an Education” opportunity.
At the Federal tax level, all gift contributions to a 529 Plan are permitted to accumulate on a tax-deferred basis, and any earnings are tax free if the money is used to pay for the gift recipient’s (the 529 plan beneficiary) qualified education expenses. It is important to note that any earnings that are withdrawn and not used for a qualified education expense are taxed at the individual’s rate and subject to a 10% penalty. At the state tax level, some states offer tax deductions for your gift contributions to a 529 Plan; there are those states that also exempt qualified withdrawals from income tax. State-specific rules apply to the use of 529 Plans for K-12 education funding, as not every state has amended their rules to follow the federal tax treatment afforded to K-12 funding.
Connection to the Next Generation
As your family may expand and welcome new children or grandchildren, this happy event is also a great time to consider how you may be able to help fund their education and establish a solid foundation of financial security and literacy in those younger
generations of your family. When the time comes, you, with the help of your Financial Advisor, may consider discussing the reasons for the gift of the 529 plan with the beneficiary, and use this as a learning experience as they begin to establish
their own goals and understanding of personal finances.
Working With Janney
Depending on your financial needs and personal preferences, you may opt to engage in a brokerage relationship, an advisory relationship or a combination of both. Each time you open an account, we will make recommendations on which type of relationship is in your best interest based on the information you provide when you complete or update your client profile.
When you engage in an advisory relationship, you will pay an asset-based fee which encompasses, among other things, a defined investment strategy, ongoing monitoring, and performance reporting. Your Financial Advisor will serve in a fiduciary capacity for your advisory accounts.
For more information about Janney, please see Janney’s Relationship Summary (Form CRS) on www.janney.com/crs which details all material facts about the scope and terms of our relationship with you and any potential conflicts of interest.
By establishing a relationship with a Janney Financial Advisor, we can build a tailored financial plan and make recommendations about solutions that are aligned with your best interest and unique needs, goals, and preferences.
Contact us today to discuss how we can put a plan in place designed to help you reach your financial goals.
This does not constitute tax, legal, or accounting advice. For tax, legal, or accounting advice, please contact the appropriate professional.
This is for informative purposes only and in no event should be construed as a representation by us or as an offer to sell, or solicitation of an offer to buy any securities. The factual information given herein is taken from sources that we believe to be reliable, but is not guaranteed by us as to accuracy or completeness. Opinions expressed are subject to change without notice and do not take into account the particular investment objectives, financial situation, or needs of individual investors. Employees of Janney Montgomery Scott LLC or its affiliates may, at times, release written or oral commentary, technical analysis, or trading strategies that differ from the opinions expressed within.
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